Weekend Feature: The How of Habbo Hotel

How did a small Finnish company create an online world which now boasts the largest current active user base in Europe and North America (about 6.5 million)*, far larger than World of Warcraft (around 4.5 million, not counting its Chinese audience)? Last week, Sulka Haro of Sulake Labs flew all the way to the Game Developer Conference in Austin, Texas to explain how the teen-oriented, Shockwave-driven Habbo Hotel has grown from a tiny 2.5D space of two rooms into a massive place that last year made an estimated $77 million in annual revenue. (Much smaller earnings than Blizzard’s WoW, to be sure, but then, Sulake has a staff of just 300 to Blizzard’s 2700.)

Gamasutra was on hand to take great notes, which is a good thing, because very few developers reportedly attended Haro’s talk. (The phenomenal success of Habbo Hotel continues to be criminally under-appreciated by the game industry.) Reading Gamasutra’s coverage, I’ve gleaned five takeaways that strike me as most valuable. [digg=http://digg.com/gaming_news/The_How_of_Habbo_Hotel]

Old School Ages Better

Originally launched in 2000 as a two room space made to promote a Finish pop group, Sulake was surprised to find the place swamped by international players who couldn’t even speak the language; they retooled and expanded as Hotel Goldfish, then re-dubbed to become Habbo Hotel. Throughout that time, Habbo has retained the same look of blocky, pixel-heavy, 2.5D graphics.

“It’s actually served us pretty well,” says Haro. “If you think about 3D games from seven years ago they look pretty terrible. And the kids who play this game don’t even know what the word ‘retro’ means. It’s just another look to them.” Upgrading to 3D graphics (the game industry assumption) would have required enormous development costs, and by requiring a better computer to run, cut out much of their audience.

More Revenue Streams, not Less

Initially launched with premium SMS as a payment model for virtual furniture, Sulake had to tweak this scheme to prevent hacking, then when they went opened in UK in 2001, where few kids had cell phones back then, changed to selling virtual currency. They’ve added “rare item” sales, external advertising, and other revenue channels, and a wide variety of ways for kids to pay. This is in marked contrast to most other MMOs, which are generally tied to a single major stream. Not a good idea, especially when dealing with an international audience. “Credit cards and prepay cards are cool — but they just don’t cut it in the global market.”

Roll with the Churn

To me, the biggest surprise is just how many Habbo accounts have been created, in relation to active users: 80 million to 7.5 million. (Parenthetical: this is roughly the adoption rate of Second Life, which is 12-15%, and I suspect most other free account-driven worlds, too.) Haro evidently didn’t address Habbo’s high churn rate at GDC, but what’s striking is that it hasn’t mattered to its popularity. My guess is that the turnover is a necessary part of it, as kids experiment with numerous different avatars, before finding the community and the identity they want to stick with.

Different Countries Mean Different Audiences

Haro mentions a fascinating demographics analysis of players according to personality types (Rebels, Creatives, Achievers, Loners, Traditionals), and unsurprisingly, these vary according to nation. (The US has a lot of Achievers, and Japan, a lot of Loners.) This suggests that content and experience should be tweaked to cater to these types, and to national expectations around them. At one point, Habbo’s Japan area was swamped by Finns, leading to “a total catastrophe — the Japanese locked up their rooms and didn’t allow people in their rooms unless they had a Japanese name.” As a result, Sulake closed off the Japan region until its users had grown large enough not to feel overwhelmed by outsiders.

Another key demographic: Habbo is 51% boys and 49% girls, a rare gender parity that’s surely crucial to its success as a social game.

Think Play Space, Not Game

Haro calls Habbo a “gameless game”, adding “I’m very proud that we have this core gameplay without going out and killing monsters.” Instead, they’ve created a number of themed rooms and let the players devise their own games around them. Habbo users have joined together to run their own roleplay areas, and the company keeps a light hand on community management, because then, “the players forget that the player-created content is the core of the world.”

The reason this has worked so well, he speculates, is because it serves a deep need for adolescents. “If you look, little kids will play for hours… but teenagers are reaching the age where that’s not socially allowed anymore. We’re providing an environment where that’s OK.” (Also a philosophy behind Gaia Online, the US-based teen MMO showing amazing growth.)

If there’s anything more interesting than the actual Habbo Hotel talk, it’s who didn’t really attend it: the game industry. GDC is the preeminent conference for both the creative and business sides of it, but according to several attendees, Haro’s presentation attracted but a tiny audience, especially compared to a re-tread presentation on WoW, which was packed. “It was downright shameful how few people were at this keynote,” veteran game designer Raph Koster moans on his blog. Koster has been the industry’s biggest advocate of merging 2.0 principles to games, but he’s still a largely solitary figure. “This was stuff that the crowd here needed to hear.”

“Most of us are slow,” fellow MMO vet designer Scott “Lum the Mad” Jennings acknowledges in his own worthy GDC wrap-up. “We obsess over what the big news was last year, much like hidebound militaries that always train to fight the war that they just got finished with.” By that logic, maybe the industry will be ready to hear about Habbo Hotel in 2008– but as I’ve argued, it’s probably way too late for them already.

* The Gamasutra post puts Habbo at 7.5 million active users; in May, it was 7.9 million, largely from the EU and North America, with about a million, interestingly enough, from Latin America. See image, from Habbo spokeswoman Susan Mills.